Despite Reduction of MPR to 27%, Maximum Lending  Rises to 29.69% 

Kayode Tokede

Despite the reduction of the Monetary Policy Rate (MPR) to 27 per cent, by the Central Bank of Nigeria (CBN), the banking sector’s average  maximum lending rate increased to 29.69 per cent in November 2025 from 29.56 per cent in October 2025.

Maximum lending rate represents the average of the highest lending rates charged by deposit money banks in Nigeria and it is influenced by the CBN’s monetary policy adjustments.

Also, the average maximum lending rate at 30 per cent in 2025 was the effective ceiling rate in Nigeria’s banking system and it reflects credit risk, inflation uncertainty, weak contract enforcement and hike in operating costs.

In the period under review, inflation rate, according to National Bureau of Statistics (NBS) rebased Consumer Price Index (CPI)  had dropped to 14.45per cent as of November 2025 from 15.44 per cent December  2024, while Naira at the Nigerian Foreign Exchange Market (NFEM) closed November  28, 2025 at N1,446.9 against the dollar from N1,5350 against the  dollar December 31, 2024.

According to the CBN’s money market indicator, the reported 30.50 per cent and 29.31 average maximum lending in February and July  2025, were the highest and lowest rates, respectively.

With interest rate at 27.00 per cent, commercial banks typically add a margin of +260 and -250 basis points above the interest rate to cover credit risk, inflation, and operational costs.

In the move to tackle inflation rate and stabilize Naira at the foreign exchange market, the CBN since August 2026 retained its rate at 27 per cent from 27.5per cent it was since 2024.

In December 2024, the maximum lending rate was 29.71 per cent, when the MPC voted to retain the MPR at 27.50 per cent

The steep increase in the interest rate has sparked concerns regarding the potential impact on the cost of credit for businesses already facing economic hardships due to foreign exchange unification and fuel subsidy removal by the Federal Government.

CBN data revealed that the average maximum lending rate rose to 29.79 per cent in January 2025 from 29.71 per cent in December 2024 when the Monetary Policy Committee (MPC) members voted to retain MPR to 27.50 per cent.

Early in 2024, the money market indicators of CBN showed a 27.07 per cent average maximum lending rate in January 2024 when MPR was at 18.75 per cent, while in March 2024, it closed at 29.38 per cent as MPR stood at 24.75 per cent in March 2024.

When the MPR increased from 26.75 per cent in August 2024 to 27.25 per cent, the average maximum lending rate also rose from 29.93 per cent in August 2024 to 30.21 per cent in September 2024.

The banking sector lending rate in Nigeria averaged 14.17 per cent from 1961 until 2024, reaching an all-time high of 37.80 per cent in September of 1993 and a record low of six per cent in April of 1975.

In 2020, the average maximum lending rate reached a peak of 30.73 per cent when the MPR rate stood at 13.5per cent

According to the CBN data, the average prime lending rate stood flat at 18.89 per cent between November and October 2025.

The reported 18.89 per cent average prime lending rate was  the highest so far in 2025, THISDAY gathered.

The prime lending rate indicates the possible rate offered to the most creditworthy customers by Nigerian banks.

As gathered by THISDAY, Nigeria’s average prime lending rate reached an all-time high of 19.66 per cent in November 2009 and a record low of 11.13 per cent in March 2021.

The steady increase in interest rate reflected in the average prime lending rate last year as the CBN intensified its effort to tackle inflation rate and stabilise the local currency at the foreign exchange market.

However, analysts have predicted a further increase in the average maximum lending rate despite a stable foreign exchange market and double-digit inflation rate.

Commenting, the Vice President of Highcap Securities, Mr. David Adnori explained that commercial banks review their lending rates regularly, subject to their respective cost of funds and the direction of interest rate, not necessarily using interest rate as a distinct value.

He stated that the interest rate gives them the direction of interest rates in the market and the price they will pay if they have to borrow from or lend to CBN.

Also, Investment Banker & Stockbroker, Mr.  Tajudeen Olayinka stated that Nigeria banks review their lending rates on a regular basis, subject to their respective cost of funds and the direction of MPR, not necessarily using MPR as a distinct value.

According to him, the interest rate signals to them the direction of interest rate in the market and the price they will pay if they have to borrow from or lend to CBN.

He said, “Therefore, their deposit mix, which includes idle customers’ deposits, determines what their weighted average cost of funds would be. They then factor in the signal from interest rate, to enable them arrive at their various prime lending rates which are usually reserved for their prime customers.”